Chapter 1

Introduction

Referral of the bill (Schedule 4)

1.1        On 15 June 2011, the Senate referred Schedule 4 of the Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (Further Election Commitments and Other Measures Bill 2011 to the Senate Economics Legislation Committee for inquiry and report by 22 June 2011.[1]

Conduct of the inquiry

1.2        As per usual practice, the committee advertised the inquiry on its website. It also wrote to stakeholders inviting written submissions by 20 June 2011. The committee received 13 submissions, which are listed in Appendix 1.

1.3        Given the time-critical nature of the bill, a public hearing was not held.

1.4        The committee thanks all those who made submissions to the inquiry at such short notice.

Overview of Schedule 4

Reasons for the amendment

1.5        Schedule 4 of the Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (Further Election Commitments and Other Measures Bill 2011 amends the current Social Security Act 1991.

1.6        In the Second Reading Speech on 23 March 2011, the Parliamentary Secretary for Community Services, the Hon Julie Collins MP stated:

A measure from the 2010-11 [B]udget will also be introduced in this bill. This measure will streamline the process of notifying Centrelink when payments are made by compensation payers and insurers.

These compensation payers and insurers will now need to tell Centrelink before compensation payments (lump sum payments as well as ongoing periodic payments) are made to compensation recipients or their partners.

The new requirement will help make sure people are paid their correct Centrelink entitlements and avoid overpayments and unnecessary debts accruing.

This measure will help simplify the process of Centrelink notification for recipients of compensation who also receive Centrelink payments.[2]

1.7        In referring the bill to the Senate Economics Legislation Committee, the Selection of Bills Committee state the reason for referral as:

Concerns of the insurance industry regarding the unworkability of the notification provisions and the disadvantage this may potentially cause injury compensation beneficiaries.[3]

The main provisions of Schedule 4

1.8        The provisions in Schedule 4 will require compensation payers, such as insurance companies and statutory authorities, to provide Centrelink advance notice on the payment (lump sum and ongoing payments) of compensation under an injury compensation scheme or insurance contract. Centrelink will then use this information to determine the social security entitlements of the compensation recipient or their partner (under s17(1) of the amended Act).

1.9        Organisations that pay compensation will need to advise Centrelink 14 days prior to compensation payments being made to recipients of income support payments (see new sections 1167A and 1167B). Notifications need to be made for any new payments, changes to ongoing payments and changes to working arrangements.

1.10      An amendment has been added in subsection 1167C(1) stipulating that insurance providers may make individual agreements with the Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) regarding the form of notice of a proposed recompense payment.

1.11      New section 1184EA provides that if a person fails to give notice as required under new sections 1167A or 1167B, and a debt to the Commonwealth is accrued, then the person required to give notice, such as an insurance provider, will be required to pay that debt. New subsection 1184EB(1) provides that payment of debt due by a person under section 1184EA also discharges a debt due by another person under section 1184EA in relation to the same compensation affected payments. In other words, insurers may be liable for the debt as opposed to individual income support recipients.

1.12      New subsection 1230(3A) provides that debts under new section 1184EA are recoverable by legal proceedings or garnishee.

Background of Schedule 4

Current Workers Compensation reporting arrangements

1.13      Currently, the onus to report compensation payments is on the individual. The process typically involves completing a form issued by Centrelink and declaring current and/or future intentions to claim. Once a compensation payment(s) has been received, the individual is obligated to inform Centrelink, after which Centrelink adjusts any income support received by the individual. All income support payments are affected, if not cancelled, by personal (not criminal) compensation claims.

1.14      It is only the 'economic-loss' component of the compensation payout that is used by Centrelink in determining eligibility for income support. If no set amount has been identified as 'economic-loss damages', and there has been a lump sum payout, Centrelink regards 50 per cent of the payout sum as economic-loss payments and uses this figure to calculate eligibility.

1.15       Many people are unaware of their reporting obligations (and at times unaware of their obligation to complete a Compensation Claim form) and/or are ill-advised by their solicitors. Therefore, Centrelink staff often have to contact individual clients, seeking information regarding compensation payouts. This lack of reporting may also result in an individual incurring substantial debt and/or being excluded from income support payments for a certain period of time (a preclusion period); the length of time determined by the payout amount.

Structure of the report

1.16      The report comprises of two chapters. Chapter 2 investigates the various issues raised in the submissions.

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